FU: Exchange Rate News for US Dollar: World’s largest economy unexpectedly contracts, Dollar falls
The US Dollar to Pound Sterling Exchange Rate was in the region of 0.6334 as of 14.45 pm
Even Barack Obama’s most stalwart fans might be wondering if they did the right thing in helping to re-elect the popular President for another term after hearing the news that the US economy shrank in the fourth quarter, defying economist’s expectations.
According to Commerce Department figures released today, America’s gross domestic product declined at an annual rate of 0.1 per cent – the nation’s worst economic performance for nearly four years.
The last time there was a reading like this, back in the second quarter of 2009, the US was still in recession.
But some industry experts are stressing that the news isn’t as bad as it might first appear.
IHS Global Insight’s director of financial economics was quoted as saying: ‘The number isn’t as bad as it looks. This really was a story about a payback in national defence spending. Consumer spending growth picked up, fixed investment was fairly strong.’
In the aftermath of Superstorm Sandy, and with incomes rising and fuel prices falling, consumer spending did pick up, but tax increases could make this difficult to maintain as 2013 progresses.
Prior to the release of the report an economist with Pierpont Securities commented: ‘Household income spiked in December, as firms helped out their workers and shareholders by accelerating wages and salaries and by paying out large one-time dividends in December to avoid the higher taxes anticipated based on the fiscal cliff debate’.
The Commerce Department figures also showed that 2.6 percentage points were subtracted from growth due to a drop in government outlays and a less substantial advance in stockpiles.
More optimistically, the US labour market continues to make steady progress, with companies adding to their workforce more than expected in January. The employment increase, at 192,000, was the best for 11 months.
After brushing a two and a half year high against safe-haven rival the Japanese Yen, the publication of America’s GDP figures initially caused the ‘Greenback’ to shed recent gains. Positive news out of Europe also left the Euro trading higher against the US Dollar, but this evening’s Federal Reserve announcement regarding fiscal policy is likely to trigger significant volatility in the hours ahead.
